FIRST PERSON - Alex Magno (The Philippine Star) - November 6, 2018 - 12:00am

The inflation numbers for October should be due for release this week. Analysts expect the headline number will still hover over 6 percent. But from this month on, expect the inflation numbers to scale downwards.

The major driver of inflation the past few months has been the rapidly rising price of crude oil. Over the past three weeks, we have seen significant rollbacks in pump prices reflecting the retreat in international prices.

Crude oil prices have retreated because of ample supply. The only uncertainty here is the effect of the economic sanctions imposed by the Trump government on Iran. If the supply from Iran is blocked, there will not be enough Saudi reserve capacity to offset it.

Washington is threatening countries that may want to continue trading with Iran with retaliation. However, two big countries – China and India – appear to be ready to defy the US and continue importing Iranian oil. These are the two most populous countries in the world with rising oil needs. They are not as vulnerable as others to US threats.

It should be noted as well that only the US chose to return economic sanctions on Iran. Russia and the European Union are not backing the economic isolation of the Islamic Republic. We will see over the next few weeks how effective the sanctions unilaterally imposed by the US will be.

As oil prices retreat, the peso has also strengthened. This allows us to fully benefit from the more benevolent pricing of oil and to bring down the prices of our other imports, particularly the large volume of capital goods purchased in anticipation of the infra program.

Domestic rice supply has likewise stabilized. This has reflected in the relaxation of market prices for the staple and for other key food items such as fish and vegetables.

The inflation spike during the second and third quarters of this year was due to the unholy combination of sharp oil price hikes, rice uncertainty and food shortages brought about by inclement weather. Leftwing groups and the mainstream opposition, however, cynically tried to politicize the elevated inflation episode by blaming it on the fiscal reform measures. They are about to lose this platform for agitation and grandstanding.

Let us not forget to penalize the opportunist politicians in the next elections. They tried to distract us from the things we could do to fight off a high inflation rate and clamored for wrong-headed policies that might have doomed us to chronically high inflation.

 One wrong-headed demand of these opportunists was to scuttle the revenue reform program that enabled us to fund social programs for the poor.


What if you threw a party and no one came?

Tomorrow, the DICT is scheduled to open the bids for the third major player in the telecoms industry. The Villar-led outfit, with its brand new franchise, announced it was not participating in the bid. A couple of other potential bidders have very loudly voiced their complaints about the stiff charges imposed by the DICT as well as policy changes introduced late in the game.

We will see tomorrow who actually turns up and agrees to participate in a bidding for a basic telecoms operation that will require massive capital infusion in a segment of the industry that is actually losing its profitability. The market is heavily saturated and the profit margins are migrating to other components of the industry such as financial technology.

In terms of profitability, mobile communications is going the way of traditional analog telephony. The fat margins are moving toward large data transmissions and applications. This is where smaller players may thrive.

Also, the so-called “duopoly” has not been standing still while government scrounges for a third telecoms player. Unless the new player comes on the crest of dramatically new technologies, they will be hard-pressed competing.

For instance, Smart Communications Inc. and the Clark Development Corp. recently signed a memorandum of understanding that will make the Freeport the first 5G city in the country. Smart is coming in with its technology partner Ericsson to fire up its first 5G cell site this month.

While the DICT was taking its time bringing in a third player in the telecoms industry, Smart was equipping over 5,600 base stations across the country with LTE capabilities. This not only improves the quality and speed of data transmission, it lays the groundwork for the introduction of what the industry calls LTE-A that enables greater capacity and faster speeds for compatible smartphones.

OpenSignal, an independent mobile analytics company, recently surveyed telecom carriers across Asia according to the customer experience for mobile video. The analysis of customer video experience uses the same metrics as those employed by the International Telecommunications Union.  

The OpenSignal study gave Smart a rating of 42.2, well ahead of the competition and significantly above the national average. This is important. The growth in demand for mobile video has been exponential. To advertise its capabilities, Smart recently launched a promo enabling its subscribers to enjoy an hour of YouTube for free.

Improvement in data transmission capacity will likewise unleash the wave of finance technologies (fintech) waiting in the wings. Fintech is the way to improve the inclusiveness of our financial system. With nearly 80 percent unbanked, the vast majority of Filipinos remain excluded from the financial system.

With all these developments, the prospective third player must not only have massive capital ready. This player must also have access to the best emerging technologies to really matter and stay in the competitive game for good.

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